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Testing Alternative Theories of the Property Price-Trading Volume Correlation

Author

Listed:
  • Charles K. Y. Leung

    (Chinese University of Hong Kong, Shatin, Hong Kong)

  • Garion C. K. Lau

    (Chinese University of Hong Kong, Shatin, Hong Kong)

  • Youngman C. F. Leong

    (Chinese University of Hong Kong, Shatin, Hong Kong)

Abstract
This article examines the correlation between the real housing price and trading volume. Contrary to the predictions of standard rational expectation models, a robust positive correlation between the two variables is identified. While no clear lead-lag relationship is found in the raw data, which is more consistent with the downpayment effect model, the medium-run component of the trading volume tends to lead (and Granger cause) the corresponding component of the property price, which is more consistent with the search theoretic model. An explanation for this difference in behavior is suggested and several future research directions are provided.

Suggested Citation

  • Charles K. Y. Leung & Garion C. K. Lau & Youngman C. F. Leong, 2002. "Testing Alternative Theories of the Property Price-Trading Volume Correlation," Journal of Real Estate Research, American Real Estate Society, vol. 23(3), pages 253-264.
    • Handle: RePEc:jre:issued:v:23:n:3:2002:p:253-264
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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